Correlation Between EJF Investments and Federal Realty

Can any of the company-specific risk be diversified away by investing in both EJF Investments and Federal Realty at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EJF Investments and Federal Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EJF Investments and Federal Realty Investment, you can compare the effects of market volatilities on EJF Investments and Federal Realty and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EJF Investments with a short position of Federal Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of EJF Investments and Federal Realty.

Diversification Opportunities for EJF Investments and Federal Realty

-0.8

Correlation Coefficient

EJF Investments  Federal Realty

Pay attention - limited upside

The 3 months correlation between EJF and Federal is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments and Federal Realty Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Realty Investment and EJF Investments is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EJF Investments are associated (or correlated) with Federal Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Realty Investment has no effect on the direction of EJF Investments i.e., EJF Investments and Federal Realty go up and down completely randomly.

Pair Corralation between EJF Investments and Federal Realty

Assuming the 90 days trading horizon EJF Investments is expected to generate 0.89 times more return on investment than Federal Realty. However, EJF Investments is 1.12 times less risky than Federal Realty. It trades about 0.21 of its potential returns per unit of risk. Federal Realty Investment is currently generating about -0.11 per unit of risk. If you would invest  11,347  in EJF Investments on October 25, 2024 and sell it today you would earn a total of  1,403  from holding EJF Investments or generate 12.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

EJF Investments  vs.  Federal Realty Investment

EJF Investments

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EJF Investments are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EJF Investments may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Federal Realty Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federal Realty Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with EJF Investments and Federal Realty

The main advantage of trading using opposite EJF Investments and Federal Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EJF Investments position performs unexpectedly, Federal Realty can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federal Realty will offset losses from the drop in Federal Realty's long position.

The idea behind EJF Investments and Federal Realty Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.